The Impact of Late or Missed Payments
Are You Playing "Catch Up"?
As a kid, you probably used it yourself with friends when you said ... "You go ahead, I'll catch up".
As an adult, it's likely you've said, "I'm playing "catch up" at work" after returning from a long weekend or vacation. Or upon meeting an old friend, asking them to give you a call so you can "catch up" with each other.
So "catch up" is typically seen as a good thing ...
It has a positive connotation. It denotes affirmative action will be taken or wrongs will be righted.
But there is one place where "catch up" is not viewed as favorably. It's viewed with more skepticism ...
And that's with credit and repayment of debts ...
Credit bureaus ... creditors ... and mortgage underwriters ... view "catch up" with a much more critical eye. In their eyes, missed and "catch up" payments raise doubts and concerns about an applicant's repayment abilities. In turn, they ask that those doubts and concerns are adequately addressed.
As of late, I've had a rash of mortgage inquiries where the mortgage candidate has mentioned they're playing "catch up" on payments they've missed ...
The latest involved applicants hoping to convert their present Adjustable Rate Loan into a Fixed Rate Loan. These homeowners had built equity in their home. Their income was consistent and sufficient to successfully move forward.
But ...
As they shared more of their financial information with me, they revealed that within the last year "maybe 1 or 2 mortgage payments" had not been made on time. Also, their current payment still remained due.
Uh-oh ...
Upon my asking for more info and background regarding those payments, the applicants questioned me as to why their late mortgage payments would matter? They had successfully played "catch up" and made the payments. In their eyes, they were current. That was the bottom line, right?
Unfortunately, it's not that simple or easy when making application for a new mortgage ...
When navigating today's mortgage application and underwriting process, much rests upon the applicants' credit history and credit scores. Should they presently hold a mortgage, their mortgage payments must have been made ON TIME, especially during the year leading up to their making their new mortgage application.
Signs of "catch up" on a credit report can be a problem and stumbling block for a mortgage applicant on the road to a new mortgage approval. In these cases, "catch up" can be viewed as a real negative.
Now I would never insinuate that efforts to repay credit commitments are wrong. They're not.
But mortgage applicants must understand: The consistency, timing, and timeliness of payments matter greatly.
Mortgage applicants should also know: Late or missing payments could affect their credit scores and the "approvability" of their new mortgage application.
Why?
Mortgage Underwriters, during the underwriting portion of the mortgage process, will be assessing the mortgage applicant on:
- Reasons for the credit issues arising
- If the issues have been resolved
- If the underlying issues have been solved
- Were the issues a one-time occurrence caused by health, employment, or other life-changing events?
- Are the issues of a chronic nature?
- More ...
In order to proceed to mortgage approval/denial, a thorough explanation (and subsequent proof) regarding those payments will be required by Mortgage Underwriters.
So it's vitally imperative that any new mortgage applicant having late or missed payments at the time they make new mortgage application remain communicative and fully engaged with their LO. They need to be completely (and quickly) forthcoming with information and answers to questions regarding their missed/late payments.
During this crucial time in the mortgage and underwriting process, the Loan Officer will be of great assistance to their client. The framing of the explanation received takes on grave importance. Mortgage approval or denial rests upon the information and explanation provided to Underwriters.
Past missteps or laissez-faire attitudes towards credit or mortgage payments can come back to haunt you. Timely consistent payments are a big deal to Lenders and their Underwriters. They're an important part of what they're looking for when considering a new mortgage application.
"Catch-up" just doesn't and won't cut it ...
I'll put my 40+ years of Mortgage experience and expertise hard to work on your behalf. I'm easily found at:
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